statutory auditors

Question 1

DEFINITION of financial auditor

Answer 1

person authorized to review and verify the accuracy of financial records and ensure that companies comply with certain criteria,

Question 2

private companies on appointmemt of auditor

Answer 2

717-720

annual general meeting - 275 (within 28 days
general meeting - upon resignation
optional -717

if not, default - 718

reapointment - 719 and 720 (rjecting 5%)

Question 3

Public companies appointment of audior

Answer 3

AGM
ORDINARY RESOLUTION

DEFAULT POWER:722

FAILURE TO NOTIFY- OFFENCE (722)

Question 4

qualification of auditors

Answer 4

practising certificate - s.21

valid annual license - s.22

Question 5

term of office of auditor (1,1,3)

Answer 5

• contract
  must be disclosed to the members:
  1. note in annual financial statement
  2. director’s report
  3. auditor’s report on annual financial statement

Question 6

duties of accountant (4 duties + 2 cases and 2 provisions)

4 duties
2 cases////1/////0

Answer 6

1. duty of care :

• Caparo Industries PLC v dickman: found a financial report had mistakes on tax payment required and they had made an actual loss due to the accountant’s mistakes. they said for negligence to arise from the conduct of the accountant the parties must be in a relationship of proximity and it must be just, fair and reasonable to enforce liability.

2. duty to exercise reasonable care and skill: re thomas gerald and sons: auditor has a duty to disclose whatever inconcistencies they find in their audit. the auditor claimed he had not been given enough time, however, the court said that they should have asked.
3. duty to be independent: s.774-775 (not memebr of the company)

no duty to circulate the report to members- only give to secretary

4. report- must be executed (735)

Question 7

rights (2) od auditor

7sssss

Answer 7

right to information - s.733

right to recieve notice and communication regarding resolutions and meetings -734

Question 8

liabilities pf auditors:2

Exemption: 1 (3 provisions)

7ssssss(3)

Answer 8

duty of care skill and diligence

duty of negligence =- caparo industruies v dickman

exception: 763(2)
Limited liability agreemnt:- 764
terms of limitations - 765

Question 9

removal od auditors (2)

7ssss

Answer 9

1. resignation
   - s.745 - give notice and reasons for resigning
   - notice to Company
2. removal by members
   - s.739
   - ordinary resolution
   special notice
   give notice to auditor and make representations
   lodge resolution; 741